108. Telegram From the Department of State
to the Embassy in the Republic of China0

Washington, May 4, 1962, 8:10 p.m.

614. Departments 594, sent CINCPAC
unnumbered.1Harriman called in Chinese
Minister Kiang this afternoon to express deep concern of USG over GRC military preparedness program.2Harriman explained that in view
of importance of subject he had expected to meet with Amb. [Page 224]Tsiang, but Ambassador Stevenson had asked that Amb. Tsiang not be called away from his duties as Security
Council Chairman during discussion delicate Kashmir question. Urgency of
business at hand made delay undesirable.

Harriman said USG is very disturbed over large increase
in military spending of nature only vaguely known to us. We are shocked
that such program has been undertaken without consulting us despite our
past close working relationship. We were further disturbed by
unsympathetic response of Vice President Chen when problem of increased
military spending was raised with him by our Charge few days ago.3Harriman said we are concerned
over possible inflationary effect of new program or, even if program
covered by new taxes, by diversion of resources from investment
necessary to maintenance of strength and growth of Taiwan economy needed
to meet future possible emergency or exploit opportunity. Jeopardizing
this strength seems to us most unwise. GRC appears to be disregarding past common understandings,
including declaration in 19 point economic reform program of January
19604 to effect military expenditures
would be kept at current level. Harriman emphasized that he spoke for highest levels of
USG in requesting that new military
preparedness program be held in abeyance until it can be reviewed by US
and discussed by responsible US officials in Taipei. He asked that our
Charge and other appropriate senior US officials be given fullest
information on new program as soon as possible.

Harriman also noted we would want
opportunity to analyze effect of new taxes. Harriman further noted concern of USG over new upsurge in publicity in Taipei
on return to mainland in connection with new taxes and stated this
publicity appears to violate past GRC
assurances that such publicity will be minimized.

Kiang responded Chinese Embassy has received no official report on new
program. He promised to report fully views expressed by Harriman and will urge early reply.

In a telephone conversation on May 3, Harriman and Michael Forrestal of the NSC staff briefly discussed Harrimans plan to talk to the
Chinese Ambassador. According to notes of the conversation made in
Harrimans office,
Forrestal stated that he
and Bundy were opposed to sanctions but thought
“nothing at all wrong with being quite firm [about] our inability to
be of any really useful help to them if they do not tell us what
they are doing.” Harriman
replied, “We can’t let them stop their growth—the example they are
giving compared to mainland China.” (Library of Congress Manuscript
Division, Harriman Papers,
Kennedy-Johnson
Administrations, Telecons)↩

Clough
reported the conversation in telegram 766 from Taipei, May 2.
(Department of State, Central Files, 793.5/5-262) Telegram 770 from
Taipei, May 4, reported similar conversations between other U.S. and
GRC representatives. (Ibid.,
793.5/5-462) Clough commented
in telegram 775, May 4, that although the reaction had been
essentially negative, this might change as the full import of the
representations sank in. He noted that Chiang Ching-kuo had been more forthcoming and might
affect an improvement in the GRC
attitude. (Ibid.)↩

Reference is to the “Accelerated
Economic Growth Program” dated January 14, 1960, enclosed with a
letter of that date from K.Y. Yin, Vice Chairman of the Council for
U.S. Aid, to Haraldson.
Paragraph 9 stated the GRC intention
to maintain defense expenditures (in constant dollars) at the
current level, “at least in the immediate future.” (Washington
National Records Center, RG 84, FRC
66 A 878, Taipei Embassy Files: Lot 65 F 163, 500—Accelerated
Program for Taiwan) See Foreign Relations, 1958-1960, vol. XIX,
p. 649, footnote 2.↩